Boohoo and the Supply Chain Nobody Checked

In July 2020, the Sunday Times published an investigation into conditions in the Leicester garment factories supplying fast-fashion retailer Boohoo. Workers were being paid as little as £3.50 per hour — well below the UK national minimum wage of £8.72. The factories were also alleged to be operating in breach of Covid-19 safety regulations.

Boohoo's share price fell by more than 40%in the days following the report. Major institutional investors reviewed their positions. The Leicester factories were, at the time of the exposure, nowhere in Boohoo's disclosed supply chain. They were sub-contractors to sub-contractors — the kind of upstream relationship that exists in most complex supply chains and that virtually no ESG rating system was designed to reach.

The rating systems had been evaluating Boohoo's published supply chain policies, its stated governance commitments, and its disclosed direct relationships. None of these pointed to Leicester. The gap between the disclosed supply chain and the actual supply chain was, for rating purposes, invisible — because ratings are built on disclosed data, and the exploitation happened precisely where disclosure stopped.

Boohoo subsequently commissioned an independent review, led by Alison Levitt QC, which found that the company had been aware of concerns about its Leicester supply chain and had not acted adequately. The review recommended wholesale changes to supply chain governance. In the two years following the report, Boohoo's share price declined by more than 80% from its pre-exposure peak.

The mechanism of failure is the same in every supply chain controversy: the rating measured what was disclosed; the harm occurred upstream of disclosure. Without independent traceability to primary production, a supply chain score cannot distinguish a well-governed supply chain from a well-documented one.